Overview
Employers who assumed the demise of the Federal Trade Commission’s noncompete rule meant a regulatory reprieve may be surprised by the agency’s renewed focus on enforcement through individual investigations and consent orders.
Noncompete agreements, which are contracts that limit employees’ employment after leaving a job, have been the subject of debate in recent years at the Federal Trade Commission (FTC). The FTC’s ambitious but short-lived attempt to ban most noncompetes nationwide in 2024 ended after the rule was blocked in court and ultimately abandoned by the FTC. Rather than pursuing a categorical prohibition, the agency is now relying on targeted, case-by-case enforcement actions against noncompete provisions it views as anticompetitive.
FTC leadership has made clear it intends to prioritize enforcement of illegal noncompetes. Over the past several months, the FTC has reinforced its commitment through public statements, warning letters, consent orders, and a workshop on noncompetes. For employers, these developments signal that noncompetes remain very much on the FTC’s radar, even without a formal rule in place. This article reviews the recent history of the FTC’s noncompete efforts, summarizes the agency’s new enforcement posture, and offers practical guidance for minimizing risk in the current regulatory environment where employer noncompete practices are back in the spotlight.
In Depth
Recent history of the FTC’s noncompete rule
In April 2024, during then-Chair Lina Khan’s final year leading the agency, the FTC issued a final rule banning nearly all employer/employee noncompete clauses. The rule would have prohibited employers from restricting workers’ ability to move to competitors or start competing businesses, with only limited exceptions. The FTC estimated that the rule would affect approximately 18% of US workers, making it one of the most sweeping labor market regulations the agency ever issued.
The rule passed along party lines on a narrow 3-2 vote. Commissioners Melissa Holyoak and Andrew Ferguson dissented, each issuing separate statements questioning both the FTC’s statutory authority and the economic justification for a categorical ban on noncompetes. Both emphasized that noncompetes generally should be evaluated under the rule of reason, meaning that any anticompetitive effects should be weighed against any procompetitive effects to form a holistic view of the overall effect of the agreement.
Before the rule could take effect, it faced immediate legal challenges. Federal lawsuits filed in Texas and Florida argued that the FTC lacked authority under the Federal Trade Commission Act to issue substantive competition rules of this scope. On August 20, 2024, a federal district court in Texas issued an order preventing the FTC from enforcing the noncompete rule nationwide.
The FTC appealed that decision on October 18, 2024, setting the stage for what could have been a lengthy appellate battle over the agency’s rulemaking authority.
A change in leadership – and direction – at the FTC
Following the election in 2025, the FTC’s leadership changed, and the commissioners who formed the majority in favor of the noncompete rule were no longer at the agency. The new leadership announced they would no longer pursue ongoing appeals to allow enforcement of the rule. The practical effect was to moot the rule entirely; it never went into effect and the agency is no longer defending it.
The FTC’s new strategy: Individualized enforcement
Rather than attempting another across-the-board rulemaking, Chair Ferguson has made clear that the FTC will instead pursue individualized enforcement actions against noncompetes that it views as anticompetitive. Without a bright-line rule, the agency has emphasized that enforcement will focus on specific facts and circumstances. In recent months, however, the FTC has signaled its commitment to regulate noncompetes through several initiatives:
- Complaint intake: In 2024, the FTC established a dedicated email address (noncompete@ftc.gov) for workers and others to submit complaints regarding noncompete agreements, which the FTC continually monitors.
- Joint Labor Task Force: Chair Ferguson announced the creation of a Joint Labor Task Force composed of staff from the Bureaus of Competition, Consumer Protection, Economics, and Policy Planning. The task force is intended to coordinate investigations and enforcement actions related to labor market competition, including noncompetes. The FTC recently highlighted this taskforce in its accomplishments for 2025, and stated that “[n]oncompete agreements remain a focus of enforcement.”
- Healthcare industry warning letters: The FTC issued warning letters to certain companies in the healthcare industry, highlighting concerns about noncompetes and other restrictive agreements limiting employment options for important roles in healthcare and restricting patient choice. In particular, the letter emphasized that these restrictive employment practices could be harmful in rural areas where medical care is limited.
- Workshop on noncompete agreements: The FTC hosted a workshop with speakers, including Chair Ferguson and Commissioner Meador discussing noncompete agreements. At the workshop, Chair Ferguson emphasized that employers should study these consent orders carefully to understand how the FTC is likely to evaluate noncompete practices going forward. The workshop also highlighted the healthcare industry, with all panelists in the session titled “Victims of Anticompetitive Noncompete Agreements” representing the broader healthcare field.
- FTC 2026 – 2030 strategic plan: The FTC’s recently released 2026 – 2030 strategic plan includes researching and investigating the impacts of “no-poach, non-solicitation, no-hire agreements, noncompete agreements, and wage-fixing agreements” for workers.
- Enforcement actions and consent orders: The FTC has initiated enforcement actions against several companies whose noncompete agreements the agency found particularly problematic, resulting in consent orders. With no formal rule in place, recent FTC consent orders provide the clearest insight into the agency’s enforcement priorities.
Enforcement actions provide insight into enforcement priorities
In the past six months, the FTC has brought three enforcement actions related to employee noncompetes, emphasizing the FTC’s continued scrutiny of noncompetes:
In Gateway Services, the FTC challenged noncompete agreements that applied broadly across the company’s workforce. The restrictions covered everyone from highly compensated executives to hourly employees, affecting approximately 1,800 workers. The FTC took issue with the lack of individualized consideration of employees’ roles, including not considering access to confidential information or competitive risk posed by their departure which would have provided procompetitive reasoning for the restrictions.
In Adamas Amenity Services, the FTC focused on a no-hire agreement involving low-wage workers. No-hire agreements are similar to noncompetes, but the agreement is between the employer and another company, rather than between the employee and the employer. The FTC alleges no-hire agreements similarly restrict employee job movement. In Adamas, the arrangement not only restricted competitors’ ability to hire workers but also, in some cases, prevented Adamas’ clients from switching vendors. The FTC viewed the agreement as suppressing worker mobility and competition without sufficient justification tied to legitimate business interests.
In Rollins, the FTC brought a complaint alleging that the pest-control company’s noncompete agreement was anticompetitive. The noncompete agreement applied to more than 18,000 employees regardless of role, with the majority of covered employees being relatively low-wage earners. The FTC alleged employees were given no additional compensation for signing the agreement nor were they given the opportunity to understand what they were signing. In addition, the FTC alleged Rollins had a history of enforcing these agreements through cease-and-desist letters and lawsuits. Rollins entered into a settlement with the FTC, agreeing to stop enforcing the noncompetes. The FTC also stated it sent warning letters to other pest-control companies asking them to review their employee agreements for anticompetitive noncompetes.
Keep in mind state enforcement
In addition to increased federal enforcement, states have also heightened enforcement of noncompetes on a local level, including some states implementing bans on noncompetes. Four states currently have full bans on noncompetes, and Washington will become the fifth state when a recently passed bill takes effect in 2027. Other states have statutes addressing and limiting noncompetes; for instance, Illinois only permits noncompetes for individuals who earn above a certain threshold and imposes certain procedural requirements. Further, each state has developed their own body of case law outlining the bounds of acceptable restrictions. Any noncompete agreement should be reviewed for compliance with applicable state law.
Key takeaways emerging from FTC enforcement of noncompetes
Notably, the FTC’s abandonment of its nationwide noncompete rule does not signal a retreat from labor market enforcement. Instead, the agency has pivoted to a more targeted strategy, relying on individualized investigations and consent orders to shape employer behavior. For companies that utilize restrictive covenants with employees, employers should undertake a particularized analysis, use careful drafting, and regularly review such agreements in light of ongoing FTC enforcement. Below are takeaways employers can glean from recent enforcement actions:
- Blanket noncompetes are high risk: Company-wide noncompetes that apply uniformly to all employees regardless of role, compensation, or access to sensitive information are particularly vulnerable to challenge. In particular, noncompetes affecting lower-wage or lower-skill workers are more likely to be viewed as anticompetitive, especially where such workers are unlikely to possess trade secrets or strategic information.
- Healthcare is a special focus: In healthcare, the FTC has emphasized concerns about patient choice and access to care. Noncompetes that could limit access to healthcare services, particularly in rural or underserved areas, may attract stricter scrutiny from the FTC.
- Unreasonable limits to competition are also considered: A noncompete that not only affects labor rights but also affects competition between companies is more likely to be scrutinized. These agreements are reviewed holistically. Where multiple types of anticompetitive harm are present, then the procompetitive benefits may be harder to offset. Before including restrictions on labor, carefully consider whether those provisions have legitimate business justifications.